Foreign VAT refund

At the end of 2020, the European Court of Justice has issued 2 cases where they ruled in favor of VAT deduction while the local VAT authorities formally rejected the VAT refund claim. Both concern German cases:

• On 17 December 2020, in the C-346/19 Bundeszentralamt für Steuern case, the Court concluded that, where an EU VAT refund claim does not contain a sequential invoice number, but an invoice reference number which allows that invoice, and thus the good or service in question, to be identified, the tax authority must consider that application to have been submitted and review the claim. In reviewing the claim, assuming the original invoice or a copy thereof is not already available to the tax authority, it may request that the applicant produce a sequential number which uniquely identifies the invoice and, if that request is not satisfied within the deadline of one month, it is entitled to reject the claim.
• On 18 November 2020, in the C-371/19 Commission v Germany case, the CJEU held that by rejecting VAT refund claims made in time but missing copies of invoices or import documents without first inviting applicants to complete their applications by submitting the missing documents (if necessary beyond the submission deadline) violated the principle of VAT neutrality, as well as the right to a refund of VAT by non-established taxpayers.

Businesses that have had EU VAT refund claims refused for formal reasons in Member States including Germany should consider whether there is an opportunity to challenge that decision. During a refund procedure, the German tax authorities usually inform a taxpayer about their intention to reject a claim and the reasons for it before they actually issue the negative decision. Therefore, taxpayers need to appeal within the deadline (generally within one month) should the tax office indicate that it intends to reject a refund claim based on formal considerations.

For the sake of completeness, we note that a local Belgian Court (Brussels, n° 2015/AF/188, dd. 3 December 2019) ruled that a non-EU entity applying for a Belgian VAT refund claim should be allowed to submit that claim within the standard statute of limitation, which is 3 years following that in which the reason for the refund occurred according to Belgian VAT legislation, and that a refund claim thus cannot be refused if it would not have been submitted by 30 September of the year following the refund year. The fact that the refund claim has been submitted out of the standard submission deadline (30 September, according to Royal Decree n° 4) is not relevant for the Court. Although this concerns a local court case only, non-EU entities who may be in a similar position (i.e. submitted a refund claim after 30 September following the refund year, but nevertheless within a period of 3 year following the refund year), can consider using this Court to support their case.

Feel free to reach out to your indirect tax contact in case you would like to discuss this in further detail.